How to Overcome Real Estate Challenges with Blockchain
Posted By : Khushboo Arora | 18-Sep-2019
Real-Estate is one of the most profitable sectors where investors have the potential to earn a high rate of returns (ROI). In spite of the high ROI, investors hesitate to invest in real estate projects because of the following reasons:
- Illiquid Asset
- High Maintenance Charges
- Unfavorable Regulations
- Higher Interest Rates
- High Brokerage Fees
- Stamp Duty
- Middle-man involvement
Blockchain can play a significant role to overcome the challenges of investment in the real-estate sector. A blockchain solution can enable the tokenization of real-estate assets while recording asset information in an immutable and transparent manner. Investment in real estate can be raised using financial instruments like Initial Coin Offering (ICO), Security Token Offering (STO), and Initial Exchange Offering (IEO). Investors can invest in real estate business through tokenization. Potential investors can purchase real estate tokens and become partial owners of a particular asset. Purchasing a property with a real estate security token can eliminate the need for middle-man. Blockchain-based security tokens add transparency to the transactions, thereby eliminating the risk of fraudulent activities. It also automates every part of the transaction to stay compliant with laws, profit distribution, etc.
Let’s explore some more benefits of investing in a property with real estate security tokens:
Global Investment Pool: Earlier investment in lucrative real estate projects was limited to wealthy investors only. Real estate assets tokenization on a blockchain has enabled investors with limited money to partially invest in lucrative real estate projects. Tokenization of real estate assets provides investment opportunities to local and regional investors with enough money and an internet connection.
Reduces Middle-Man Involvement: The purchase of a property usually happens through a middle-man like brokers, lawyers, and agents. Blockchain in real estate eliminates the role of intermediaries by automating property verification and direct payment to the buyers. Purchasing a property with cryptocurrencies can also enable buyers to bypass bank fees. Security token offerings speed up MLS (multiple listing services), improve the transparency of transactions, and provide more accurate deed transfers.
Ownership with Diversification: when a new investor enters a real-estate market he is unaware of where to invest and where not to. Therefore, investing in a real estate asset can be risky. Blockchain provides fractional ownership of a property using tokenized real estate assets to mitigate the risks of loss.
Provides Liquidity: Security tokens use blockchain technology to make traditional illiquid assets like real-estate liquid. Traditionally investments require a few days for settlement and can be traded only on weekdays from 9-5. Blockchain technology divides real estate assets into thousands or millions of digital certificates, and enable quick and easy settlement of tokens. In blockchain-based real-estate investments, investors receive full liquidity on their assets when utility tokens are exchanged in the secondary market.
Making Transaction Secure: Blockchain-powered crowdfunding in real estate happens using smart contracts, cryptography or distribution registry to ensure secure transactions. Every real-estate investment made through a security token is recorded on a secure DLT technology to ensure the safety and privacy of transactions. Transaction recorded on a blockchain platform prevents investors from the risk of fraudulent activities.
Blockchain technologies we use to overcome the challenges in the Real Estate Industry
Making an investment in real-estate projects with blockchain provides investors a high level of security and transparency. It mitigates investment risks for new investors by providing them fractional with ownership of the property. Real estate security token uses blockchain technology to liquidates traditionally illiquid assets and enables investors to receive full liquidity on them.
Are you planning to raise capital for your real estate business using blockchain solutions? Contact Oodles Technologies - We provide easy-to-use and secure blockchain smart contracts for managing, trading, storing, and issuing digital assets. We enable entrepreneurial businesses to raise capital with our secure and legally compliant STO development services. Get in touch with our blockchain team for complete details!